Marie Deonier & Associates v. Paul Revere Life Ins. Co., 02-630.

• Decision Date: 26 October 2004
• Docket Number: No. 02-630.,02-630.
• Citation: 2004 MT 297,323 Mont. 387,101 P.3d 742
• Parties: MARIE DEONIER & ASSOCIATES, Plaintiff and Appellant, v. PAUL REVERE LIFE INSURANCE CO., Defendant, Respondent and Cross-Appellant.
• Court: Montana Supreme Court

101 P.3d 742

2004 MT 297

323 Mont. 387

MARIE DEONIER & ASSOCIATES, Plaintiff and Appellant, v. PAUL REVERE LIFE INSURANCE CO., Defendant, Respondent and Cross-Appellant.

No. 02-630.

Supreme Court of Montana.

Submitted on Briefs September 4, 2003.

Decided October 26, 2004.

For Appellant: L.B. Cozzens, Paul M. Warren, Cozzens, Warren & Harris, Billings, Montana.

For Respondent: James L. Jones, Robert L. Sterup, Kyle A. Gray, Holland & Hart, Billings, Montana.

Justice JIM REGNIER delivered the Opinion of the Court.

¶ 1 This matter originally came before this Court in Marie Deonier & Assocs. v. Paul Revere Life Ins. Co., 2000 MT 238, 301 Mont. 347, 9 P.3d 622 (Deonier I). In that appeal, we reversed the District Court's grant of summary judgment in favor of Paul Revere Life Insurance Company (Paul Revere) and against Marie Deonier & Associates (Deonier). At issue was Deonier's claim that Paul Revere breached its fiduciary duty owed to her as its agent. We concluded the claim involved issues of material fact precluding summary judgment.

¶ 2 Upon remand, the District Court conducted a jury trial on Deonier's claim that Paul Revere breached its fiduciary duty to inform Deonier of the risk of litigation associated with a policy she sold on Paul Revere's behalf. At the conclusion of trial, the jury returned a verdict in favor of Deonier and against Paul Revere in the amount of $150,000 in compensatory damages for emotional distress and $1,000,000 in punitive damages. Thereafter, the District Court reviewed the award of punitive damages and, pursuant to § 27-1-221, MCA, reduced the award to $375,000.

¶ 3 Deonier now appeals the District Court's reduction of the jury's punitive damages award. Deonier further claims that the District Court erred in failing to increase the award in light of Paul Revere's alleged discovery abuses and that the Court erred in denying Deonier's motion for sanctions.

¶ 4 Paul Revere cross-appeals, claiming that the District Court erred in denying its Rule 50(a), M.R.Civ.P., motion for judgment as a matter of law and its motion for a new trial.

¶ 5 We reverse the District Court's reduction of the punitive damages and reinstate the jury's verdict.

¶ 6 We address the following issues on appeal:

¶ 7 1. Did the District Court err in denying Paul Revere's Rule 50(a), M.R.Civ.P., motion for judgment as a matter of law on Deonier's claim for breach of fiduciary duty?

¶ 8 2. Did the District Court err in denying Paul Revere's Rule 50(a), M.R.Civ.P., motion for judgment as a matter of law on Deonier's claim for punitive damages? ¶ 9 3. Did the District Court err in reducing the jury's punitive damage award from $1,000,000 to $375,000?

¶ 10 4. Did the District Court err in failing to increase the punitive damage award given Paul Revere's alleged discovery abuses?

¶ 11 5. Did the District Court err in denying Deonier's motion for sanctions?

¶ 12 6. Did the District Court give err in failing to grant Paul Revere a new trial?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 13 We review only the facts necessary to address the relevant issues herein. For a more detailed factual and procedural background, see Deonier I.

¶ 14 In Deonier I, this Court reversed the District Court's grant of summary judgment and remanded to resolve the factual dispute of whether Paul Revere knew or should have known that its potential use of the Forman defense created a risk of litigation and risk of pecuniary loss to Deonier as a result of the policy she sold on Paul Revere's behalf. See Massachusetts Casualty Ins. Co. v. Forman (5th Cir.1975), 516 F.2d 425

. The Forman defense was a strategy employed by Paul Revere where they asserted a legal defense to the incontestability clause in its policy. The defense was based on its definition of "sickness" which excluded disabilities that manifested themselves prior to the issue date of the policy. We also stated that Deonier was entitled to a trial on her punitive damages claim. On remand, Deonier conducted discovery in an attempt to determine the extent to which Paul Revere had knowledge that it intended on using the Forman defense to deny coverage to its insureds in Montana and to what extent Paul Revere knew that the use of such defense exposed its agents or brokers to pecuniary loss from lawsuits.

¶ 15 The case was presented to a jury from April 9, 2002, to April 18, 2002, after which the jury awarded Deonier $150,000 in compensatory damages and $1,000,000 in punitive damages. As required under § 27-1-221, MCA, the District Court reviewed the jury's punitive damages award and, subsequent to its review, reduced the punitive damages award to $375,000. On June 18, 2002, the District Court entered judgment in favor of Deonier in the amount of $528,269.34, said amount including the above compensatory and punitive damages as well as Deonier's costs.

¶ 16 On August 6, 2002, Deonier moved for relief under Rule 60(b)(3), M.R.Civ.P. The District Court denied that motion on September 3, 2002.

¶ 17 Deonier now appeals the District Court's reduction of her punitive damages award, the District Court's refusal to increase the punitive damages award in light of Paul Revere's discovery activities and the District Court's denial of her request for sanctions. Paul Revere cross-appeals the District Court's denial of its post trial motions. We will first address Paul Revere's cross-appeal of the denial of its post trial motions.

STANDARD OF REVIEW

¶ 18 This Court's standard of review of appeals from district court orders granting or denying motions for judgment as a matter of law is identical to that of the district court. Durden v. Hydro Flame Corp., 1998 MT 47, ¶ 22, 288 Mont. 1, ¶ 22, 955 P.2d 160, ¶ 22 (citing Ryan v. City of Bozeman (1996), 279 Mont. 507, 510, 928 P.2d 228, 229-30). Judgment as a matter of law is properly granted only when there is a complete absence of any evidence which would justify submitting an issue to a jury and all such evidence and any legitimate inferences that might be drawn from that evidence must be considered in the light most favorable to the party opposing the motion. Bevacqua v. Union Pac. R.R. Co., 1998 MT 120, ¶ 46, 289 Mont. 36, ¶ 46, 960 P.2d 273, ¶ 46; Durden, ¶ 21 (citation omitted). For a failure to grant a new trial, this Court reviews the decision of the district court for abuse of discretion. Durden, ¶ 30.

ISSUE 1

¶ 19 Did the District Court err in denying Paul Revere's Rule 50(a), M.R.Civ.P., motion for judgment as a matter of law on Deonier's claim for breach of fiduciary duty?

¶ 20 Paul Revere claims that, for Deonier to be successful in her breach of fiduciary duty claim, she was required to prove by substantial, credible evidence that Paul Revere knew or should have known prior to the sale of the policy to Kathryn Vestal (Vestal) that there was a likely risk that, 1) Paul Revere would invoke the Forman defense in Montana on a policy sold by Deonier, 2) that this Court would not follow the Doettl case but instead a minority view precluding the Forman defense, and 3) that Deonier would be sued along with Paul Revere and sustain a pecuniary loss. See Doettl v. Colonial Life & Acci. Ins. Co. (D.Mont.1981), 505 F.Supp. 127

. Further, Paul Revere claims that Deonier's knowledge that she could be sued for anything does not include the above risk and that Paul Revere knew or should have known this. Finally, Paul Revere argues Deonier did not prove causation, stating specifically that it was Deonier's burden to establish she would have acted differently if she had received a warning about the Forman defense. Paul Revere asserts that Deonier failed to present substantial and credible evidence to establish all of the above.

¶ 21 Paul Revere's purported authority for the above required proof is this Court's decision in Deonier I and Restatement (Second) of Agency, § 435 (1958), which provides:

Unless otherwise agreed, it is inferred that a principal contracts to use care to inform the agent of risks of physical harm or pecuniary loss which, as the principal has reason to know, exist in the performance of authorized acts and which he has reason to know are unknown to the agent.

Based upon the above language in the Restatement and its Comments, this Court concluded in Deonier I that the proper analysis for the District Court to apply is "whether Paul Revere had knowledge that it might assert the Forman defense in order to deny coverage on a policy sold by Deonier; and, if so, that there was a risk Deonier would incur pecuniary loss, such as attorney fees, as a result of her unknowingly false or misleading statements concerning coverage provided by the policy." Deonier I, ¶ 30.

¶ 22 We again conclude that the above was the proper analysis to be applied, and thus disagree with Paul Revere that Deonier was required to present evidence to satisfy Paul Revere's suggested multi-tiered analysis. Simply put, if the jury was presented with evidence with which it could conclude that Paul Revere's act of failing to inform Deonier that it might invoke the Forman defense to deny coverage and as a result Deonier would suffer damages, then granting a Rule 50(a), M.R.Civ.P., motion for judgment as a matter of law would have been inappropriate.

¶ 23 Moreover, we agree with Deonier that, given the issue of breach of fiduciary duty before the jury, it is immaterial whether Paul Revere believed its actions were supported by the United States District Court opinion in Doettl or supported by a majority of states. As noted by Deonier, even if this Court had declared the Forman defense legal in Montana, if Paul Revere had knowledge that it might engage in conduct that created a risk of pecuniary loss to Deonier, such knowledge gives rise to a duty to warn its fiduciary of the known risk. Restatement (Second) of Agency, § 435; Deonier I, ¶ 28.

¶ 24 We first note that this Court reversed the District Court in Deonier I, in part, because we concluded that the paper...